Global hos­pi­tal bud­gets are a hit in Mary­land; more states should con­sider the prac­tice

Modern Healthcare - - Comment - By Dr. Joshua Sharf­stein

De­clin­ing mar­gins. De­pen­dence on fee-for-ser­vice rev­enue as pres­sure rises to ex­pand par­tic­i­pa­tion in al­ter­na­tive pay­ment mod­els. Frus­tra­tion among med­i­cal pro­fes­sion­als over loss of ini­tia­tive and au­thor­ity. Un­cer­tainty over the fu­ture of na­tional health pol­icy.

The year was 2013, and Mary­land’s unique rate-set­ting sys­tem for hos­pi­tals was at a cross­roads. To suc­ceed, the lead­ers of Mary­land hos­pi­tals chose a path not pre­vi­ously taken: all-payer global hos­pi­tal bud­get­ing. No longer would there be an im­per­a­tive to keep in­pa­tient vol­umes high. Piv­ot­ing away from fee-for-ser­vice re­im­burse­ment, each hos­pi­tal agreed to re­ceive a prospec­tively set, all-payer global bud­get each year. By July 2014, these new ar­range­ments in­volved more than 98% of the state’s hos­pi­tal rev­enue.

Three years later, Mary­land hos­pi­tals are still stand­ing—in fact, mar­gins are up. Preventable ad­mis­sions and read­mis­sions are down. So too are costs, with hos­pi­tal ex­pen­di­tures in the Medi­care pro­gram for Mary­land res­i­dents run­ning more than $400 mil­lion un­der na­tional trends. Col­lab­o­ra­tions with com­mu­nity or­ga­ni­za­tions across the state are ex­pand­ing.

Should hos­pi­tals out­side Mary­land go global too? Small, ru­ral hos­pi­tals have been the first out­side Mary­land to ex­press in­ter­est. Many of these hos­pi­tals, on the brink of in­sol­vency, are strug­gling to main­tain needed fee-for-ser­vice vol­ume. Some have tried to sur­vive by of­fer­ing new ser­vices to their com­mu­ni­ties, such as hip and knee re­place­ment. How­ever, with­out ad­e­quate vol­ume, the qual­ity of care can be ques­tion­able, and fi­nan­cial re­turns are far from guar­an­teed.

An all-payer global bud­get, by con­trast, sta­bi­lizes rev­enue and of­fers the chance to align a hos­pi­tal’s in­cen­tives with the health of its com­mu­nity. “Be­fore global bud­get­ing, I met with my chief fi­nan­cial of­fi­cer each week to fig­ure out how to keep the beds filled,” one CEO of a Mary­land hos­pi­tal said at a meet­ing. “Af­ter global bud­get­ing, I meet with my CFO each week to fig­ure out how to keep the beds empty.” His hos­pi­tal is ex­pand­ing ac­cess to healthy food, school-based health ser­vices and pri­mary care.

In Jan­uary, Pennsylvania an­nounced an all-payer global bud­get­ing pi­lot that aims to in­volve 30 ru­ral hos­pi­tals over the next three years. The idea is for a new ru­ral health re­design cen­ter to set the bud­gets in co­or­di­na­tion with the CMS, as­sign pay­ments to pub­lic and pri­vate pay­ers, and pro­vide tech­ni­cal as­sis­tance and startup fund­ing to hos­pi­tals.

Large, safety-net hos­pi­tals could not look more dif­fer­ent than their ru­ral coun­ter­parts. Their emer­gency de­part­ments are teem­ing with pa­tients, and their ser­vice ar­eas may over­lap with those of pri­vate health sys­tems. And yet—like their peers in small­town Amer­ica—these hos­pi­tals have a strong so­cial mis­sion that in­cludes a com­mit­ment to ad­dress the un­der­ly­ing causes of health dis­par­i­ties and ma­jor sources of preventable ill­ness.

Their com­mon frus­tra­tion is find­ing the fund­ing to in­vest in crit­i­cal com­mu­nity ser­vices, such as men­tal health cri­sis re­sponse, ad­dic­tion treat­ment, en­hanced pri­mary care and sup­port­ive hous­ing. Many safety-net hos­pi­tals still re­ceive the vast ma­jor­ity of their rev­enue from fee-for-ser­vice re­im­burse­ment, and most Med­i­caid in­di­rect pay­ments also track along with in­pa­tient uti­liza­tion. This means that suc­cess in pre­vent­ing ill­ness might re­duce hos­pi­tal rev­enue and even pre­cip­i­tate a fi­nan­cial cri­sis.

Far bet­ter for suc­cess is a sys­tem that re­wards ef­forts to pre­vent ill­ness—an in­cen­tive struc­ture in­her­ent to global bud­get­ing. That’s why vul­ner­a­ble ur­ban hos­pi­tals might also con­sider this fi­nan­cial model as a tool to as­sist in trans­form­ing ser­vices to em­pha­size com­mu­nity health and pre­ven­tion.

As a re­cent Com­mon­wealth Fund pa­per de­scribes, es­tab­lish­ing all-payer hos­pi­tal global bud­gets re­quires a se­ries of steps: a vi­sion for trans­for­ma­tion, an op­er­a­tional plan that in­cludes iden­ti­fy­ing an agency to set and ap­por­tion the bud­gets with pay­ers, and strong sup­port from state and fed­eral pol­i­cy­mak­ers.

This in­no­va­tive ap­proach to pay­ment isn’t right for ev­ery hos­pi­tal. Some may be able to suc­ceed through fully in­te­grated pop­u­la­tion health ap­proaches such as ac­count­able care or­ga­ni­za­tions and part­ner­ships with in­sur­ers. But for those with dwin­dling mar­gins, con­flict­ing pres­sures and anx­i­ety about the fu­ture, the time for se­ri­ous con­sid­er­a­tion of global bud­get­ing is now.

Dr. Joshua Sharf­stein is a pro­fes­sor and as­so­ciate dean for pub­lic health prac­tice and train­ing at the Johns Hop­kins Bloomberg School of Pub­lic Health.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.